France's Hollande to add 500,000 fake jobs to cut jobless rate

On Monday François Hollande, French president, proclaimed an economic and social emergency ('un état d’urgence économique et social') and the creation of 500,000 fake jobs is the main item of a number of measures that he announced to business and trade union leaders. With a presidential election due in 15 months, Hollande has said in the past that he would not seek reelection if unemployment is higher than when he took office in May 2012 — the harmonised jobless rate was at 9.7% in Q2 2012 and last November it was at 10.1%.

The broad French unemployment rate is at about 20% while the harmonised narrow rate of 10.1%, based on the International Labour Office (ILO) definition, compares with a Euro Area average of 10.5%; an EU28 average of 9.8%; Germany at 4.5% and a UK at 5.2%.

France ended three years of economic stagnation in 2015 with growth of more than 1.0% and according to Agence France-Presse, unemployment has increased by 650,000 people since Hollande became president.

Eurostat's data for November has the total French unemployed at 2.98m while AFP quotes a total of 3.57m that was issued by the labour ministry based on data from national employment centres (Pôle emploi).

President Hollande committed spending €1bn to create 500,000 training positions that will mean more than 1m French unemployed will be classified as being in employment. Another €1bn will be used to increase apprenticeships and SME firms (employing fewer than 250 people) will receive a €2,000 bonus for each new employee with a contract of more than six months, under certain conditions.

The Financial Times reports that about a third of individuals who participate in public training schemes get a job.

The broad jobless rate of 20% is based on data from Insee, the national statistics office, which show 1.7m part-time workers seeking full-time work and a further 1.4m who say they want to work but they are not actively looking for it.

France last reported an annual budget surplus in respect of 1974; the official unemployment rate was 3% in early 1975 and the gross public debt/ gross domestic product (GDP) ratio has risen from 22% in 1975 to 97% in September 2015.

fluctuated within a corridor ranging between a low of 7% and a high of 10.5% of the labour force, with an average for the period of roughly 9% . The mid-1980s was not chosen as a random benchmark: it marks the emergence of mass unemployment in France...the expression was first coined in the 1970s during the two oil shocks and the rapid surge in unemployment, which rose from 3% in early 1975 to 8% ten years later (data for mainland France, for which there is long-term historical series). Thereafter, the jobless rate in mainland France never fell significantly below 8% for any real length of time (see chart 1).

Successive governments have launched a huge number of programs in recent decades to address the jobs challenge. The Hollande administration has cut employer social security costs, provided subsidies for hiring young people and so on but it's not easy to change fundamentals including low skills among a significant ratio of a workforce.

Apart from lower growth in France, Baudchon also points to changes demographics.

The labour force in France has grown nearly twice as fast as its German counterpart, at an annual average of 0.6% and 0.3%, respectively, for the period 2010 to 2014.